Urban development funding has a variety of effects

DIW Econ conducted a study on behalf of DIE STADTENTWICKLER based on data from SOEP and the INKAR database. The study examined living conditions in urban development areas and the impact of subsidies on the construction and renovation of housing.

The results show that residents of subsidised areas have lower incomes on average, show less trust in democratic institutions, participate less frequently in social life and rate their health, quality of life and living environment more negatively. At the same time, the analysis highlights the potential of urban development funding to reduce these social differences.

The funding also has a positive effect on the housing market: for every €1 million in federal funding, an average of around 20.5 additional renovation measures and around 19.5 new flats are created per year. Extrapolated to the annually available funds of around €777 million, this means around 16,000 renovated and 15,000 newly built flats. In addition, the funding reduces the vacancy rate: if 10% additional funds are used in a district, the vacancy rate in the housing sector falls by more than 0.3%.

Urban development funding also has a positive effect on employment: around 61,000 jobs in construction and in upstream and downstream industries are directly or indirectly linked to the funding.

Study author Christian Danne sums it up: ‘At the end of the day, urban development funding is an effective tool for equalising living conditions, creating housing and promoting employment. Targeted investments in disadvantaged areas can reduce social and spatial disparities in the long term.’

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